Schumer blasts subprime ads, calls for FTC action

U.S. Sen. Chuck Schumer came to Schenectady today to draw attention to the fact that mortgage lenders continue to advertise subprime loan products.

Subprime mortgages are typically given to borrowers with less-than-ideal credit. Subprime loans, which often have adjustable payment schedules, have been linked to rising default and foreclosure rates, leading some to question their validity.

Schumer, repeating statements he has made elsewhere, said the lenders are peddling the same loans that led to the current “crisis.”

“It is inexcusable that lenders are continuing to advertise subprime loans as if everything was hunky-dory,” the Brooklyn Democrat said. “Unfortunately, instead of working with endangered homeowners, unscrupulous lenders are going out of their way to push high- risk loans and preventing mortgage holders from refinancing.”

Of course, subprime loans are not illegal, so the lenders are not forbidden from continuing to offer them. And it’s unclear if the advertisements are effective: Lenders such as Stuart Schultz, owner of the now-defunct Guardian Loan Co. in Clifton Park, have noted that negative subprime publicity has made some potential borrowers wary of such loans.

But some consumer advocates say homeowners in financial trouble or facing foreclosure may be particularly susceptible to loans that seem to offer a way out of trouble — even if those loans may be a poor long-term choice.

Schumer said television advertising by subprime lenders such as Countrywide and LendingTree makes no mention of the pitfalls and current dangers of taking out subprime and variable-rate loans.

Schumer also announced what he called a plan “to crack down on potentially false advertising by lenders” and called on the Federal Trade Commission to immediately issue a widespread consumer alert to help potential homebuyers avoid misleading advertising and loans.

Schumer was joined at his afternoon new conference on Plymouth Avenue by William Cook of Schenectady, a disabled veteran who is struggling with rising mortgage payments.